Healthcare reform law’s big winner: Indian outsourcers

May 20, 2010

On March 23, 2010, President Obama signed H.R. 3590 Patient Protection and Affordable Care Act (PPACA), or simply known by some as “Obamacare,” into law with the first provisions taking effect on June 21, 2010 (90 days after enactment) – giving plenty time for politicians and other major stakeholders, including outsourcers, to actually read and attempt to understand the new law. And while it remains to be seen whether or not the health care and insurance industries, employers and the American people themselves will actually benefit or be hurt by all of the provisions in it, one group that clearly stands to gain are Indian outsourcers.

Already, Dow Jones has noted that analysts are expecting the US government to spend some US$15 to US$20 billion on healthcare and much of this spending will naturally be spent with Indian outsourcers. Moreover, insurance companies and health care providers will need to start restructuring their operations as the various provisions come into effect. In fact, the Christian Science Monitor has noted that Ananda Mukerji, the chief executive officer of Firstsource Solutions, has said that the addition of 32 million insured Americans will create plenty of extra paperwork such as new enrollments and more claims plus create a need for bigger IT databases and more support services. Mukerji has also cited a recent Deloitte Center for Health Solutions study that showed that up to 41% of the cost of a health plan is actually administrative.

However, there are some aspects of health care administration that cannot be outsourced outside of the USA and hence, major Indian outsourcers have already set up shop in the USA to take advantage of this situation. In fact, Wipro already has a development center in Atlanta with 500 employees and runs a call center for a healthcare client plus Tata Consultancy Services has a similar base already set up near Cincinnati with 300 employees while Infosys is planning a Dallas based operation.

On the other hand, the Seeking Alpha investment blog has noted that certain outsourcing destinations such as China, India, Mexico and the Philippines will probably start clamoring to get a lead in healthcare outsourcing. However, they also noted that outsourcers who are able to offer onshore or near shore capabilities, such as firms who have setup operations in Canada or Mexico, will probably get the most benefits from the new law.

And while BPO type operations are clearly the big winners, the Indian Times has noted that the new law will unlikely result in a large amount of new healthcare technology outsourcing coming from the USA as it does not call for any major reengineering or redesign of existing IT platforms. It was further noted that Indian healthcare IT providers tend to focus on application management, maintenance and legacy modernization and systems integration and hence, any additional work will likely end up being done by Accenture, EDS (HP) or IBM onshore and not in India.

Nevertheless, established Indian outsourcers are already the clear winners from the healthcare reform law and they expect to see plenty of more work come in their direction over the coming few years.